If a subsidiary is not consolidated, the equity method can be used only if significant influence exists.

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The equity method of accounting is used when an investing company has significant influence over the investee, typically indicated by owning 20% to 50% of the investee's equity. If a subsidiary is not consolidated, usually because the parent does not have a controlling interest, and significant influence exists, the equity method can indeed be applied.

If a Subsidiary Is Not Consolidated, the Equity Method Can